Chapter 11 College and University Accounting

3. Public colleges and universities are (primarily) subject to financial reporting standards issued by: A) FASB. B) GASB. C) AICPA. D) None of the above.

B) GASB.

2. Private colleges and universities are (primarily) subject to financial reporting standards issued by? A) FASB. B) GASB. C) AICPA. D) None of the above.

A) FASB.

40. Which of the following is true regarding the Statement of Cash Flows for a public college? A) A reconciliation is required, reconciling operating income in the Statement of Revenues, Expenses, and Changes in Net Position to the cash flows provided (used) by operating activities. B) Cash purchases of capital assets are reported as outflows in the investing activities section. C) Both A and B are true. D) Neither A nor B is true.

A) A reconciliation is required, reconciling operating income in the Statement of Revenues, Expenses, and Changes in Net Position to the cash flows provided (used) by operating activities.

47. In December 2016 a donor to a college established a trust in which college receives $ 5,000,000 to be invested. The donor's spouse is to receive $ 40,000 of the income per year for ten years. At that point, the assets and income revert to the college. The college estimates that the present value of the anticipated receipts from the trust amount to $ 4,800,000. How should this $ 4,800,000 be recorded in 2016, assuming The College is a private institution The College is a public institution A) Contribution revenue Deferred inflow B) Contribution revenue Contribution revenue C) Deferred inflow Deferred inflow D) Deferred inflow Contribution revenue

A) Contribution revenue Deferred inflow

43. Which of the following is true of a Statement of Cash Flows for a private college or university? A) Either the direct or indirect method is acceptable. B) Four categories are used: Operating, Capital Related Financing, Non-capital Related Financing, and Investing. C) Cash flows must be presented separately for Unrestricted, Temporarily Restricted, and Permanently Restricted categories. D) All of the above are true.

A) Either the direct or indirect method is acceptable.

4. Private universities follow the authoritative standards of _____ and use the _____ basis of accounting. A) FASB, Accrual. B) FASB, Modified-accrual. C) GASB, Accrual. D) GASB, Modified-accrual.

A) FASB, Accrual.

29. With respect to public colleges and universities, state appropriations for operating purposes are shown as: A) Nonoperating revenue. B) Operating revenue. C) Nonexpendable endowments. D) None of the above.

A) Nonoperating revenue.

9. Which of the following is not true regarding the Statement of Revenues, Expenses, and Changes in Net Position for a public college? A) Revenues are required to be presented in the categories of Permanently Restricted, Temporarily Restricted and Unrestricted, while all expenses are classified as Unrestricted. B) Tuition fees waived by the institution in return for services provided by employees and student assistants are shown as expenses. C) Interest expense is accrued and bond premiums and discounts are amortized. D) None of the above.

A) Revenues are required to be presented in the categories of Permanently Restricted, Temporarily Restricted and Unrestricted, while all expenses are classified as Unrestricted.

13. Which of the following is not true regarding the Statement of Revenues, Expenses, and Changes in Net Position for a public college? A) State appropriations and Pell Grants are reported as operating revenue B) Revenues from residence halls, dining services and bookstores are reported as Auxiliary Enterprises - within operating revenue. C) Expenses associated with central management, planning and administration are classified as Institutional Support D) None of the above, these are all true.

A) State appropriations and Pell Grants are reported as operating revenue

23. Which of the following is true? A) Tuition and fees charged are included in income and the fees waived for graduate assistants are expensed. B) Scholarship allowances for which no services are required are expensed. C) Fees waived for graduate assistantships for which services are required are deducted directly from tuition revenue. D) Revenues for summer sessions are recorded in deferred revenues and recorded as revenue when the semester ends.

A) Tuition and fees charged are included in income and the fees waived for graduate assistants are expensed.

27. Inflows from self-supporting operations by a private college are known as auxiliary enterprises and are classified as A) Unrestricted Revenue B) Temporarily Restricted Revenue C) Permanently Restricted Revenue D) Either A or B

A) Unrestricted Revenue

12. Public colleges are required to report residual equity in the following categories: A) Unrestricted, Restricted, and Net Investment in Capital Assets B) Temporarily Restricted , Permanently Restricted and Unrestricted C) Unrestricted, Temporarily Restricted and board designated D) Restricted, Unrestricted and Temporarily Restricted

A) Unrestricted, Restricted, and Net Investment in Capital Assets

24. A private college had tuition and fees for the year ended June 30, 2017 in the amount of $45,000,000. Scholarships, for which no services were required, amounted to $4,800,000. Graduate assistantships, for which services were required, amounted to $2,300,000. The amount to be reported by the college for net tuition and fee revenue would be: A) $37,900,000. B) $40,200,000. C) $42,700,000. D) $45,000,000.

B) $40,200,000.

33. How should the following revenues be reported by a private college? $15,000 for the improvement of a study lounge, $5,600 in unrestricted contributions, $600 unrestricted investment income on endowment investments, $11,600 sales of services by auxiliary enterprises. Unrestricted Restricted A) 32,800 0 B) 17,800 15,000 C) 17,200 15,600 D) 5,600 27,200

B) 17,800 15,000

10. In addition to a Statement of Financial Position and a Statement of Activities, a private college or university is required to present: A) A Statement of Functional Expense. B) A Statement of Cash Flows. C) Both (a) and (b). D) Neither (a) nor (b).

B) A Statement of Cash Flows.

31. The following information applies to the next two questions: Tuition and fees for Northern University were assessed at $22,000,000. $ 1,600,000 of the amount due from students was later reduced by need based scholarships. Graduate assistantships and work-study stipends reduced the amounts collectible from student by an additional $ 1,000,000. What is the journal entry to record tuition revenue? A) Accounts receivable 20,400,000 Operating Revenue-Student Tuition & Fees 20,400,000 B) Accounts Receivable 22,000,000 Operating Revenue-Student Tuition & Fees 22,000,000 C) Accounts Receivable 19,400,000 Operating Revenue-Student Tuition & Fees 19,400,000 D) Accounts Receivable 21,000,000 Operating Revenue-Student Tuition & Fees 21,000,000

B) Accounts Receivable 22,000,000 Operating Revenue-Student Tuition & Fees 22,000,000

28. When summer school classes at a university cover parts of two fiscal years, the revenues and expenses are A) All recognized in the second of the two years. B) Apportioned to the two fiscal years. C) Recognized in the year in which the term was predominantly conducted. D) All recognized in the first of the two years.

B) Apportioned to the two fiscal years.

21. Scholarships (tuition discounts) provided to students where no service is required: A) Are included in tuition revenue and recorded as an expense. B) Are reported as a reduction of revenue by directly reducing the revenue account or increasing a contra- revenue account. C) Are not included in tuition revenue but are included as an "other source". D) Are reported as an adjustment to tuition revenue in the government-wide statements.

B) Are reported as a reduction of revenue by directly reducing the revenue account or increasing a contra- revenue account.

42. Which of the following is true regarding the Statement of Cash Flows for a public college? A) Cash received for interest is reported as an increase in cash flows from operating activities. B) Cash paid for interest is reported as a decrease in cash flows from either noncapital or capital and related financing activities. C) Both A and B are true. D) Neither A nor B is true.

B) Cash paid for interest is reported as a decrease in cash flows from either noncapital or capital and related financing activities.

41. Which of the following is true regarding the Statement of Cash Flows for a private college? A) Cash Flows from Operating Activities must be presented on the direct method. B) Cash purchases of capital assets are reported as outflows in the investing activities section. C) Both A and B are true. D) Neither A nor B is true.

B) Cash purchases of capital assets are reported as outflows in the investing activities section.

7. Which of the following is not true regarding the Statement of Revenues, Expenses and Changes in Net Position for a public college? A) The accrual basis of accounting is used to measure revenues and expenses. B) Encumbrances are recorded at the time purchase orders are issued. C) Depreciation expense is recorded. D) All of the above are true.

B) Encumbrances are recorded at the time purchase orders are issued.

32. The following information applies to the next two questions: Tuition and fees for Northern University were assessed at $22,000,000. $ 1,600,000 of the amount due from students was later reduced by need based scholarships. Graduate assistantships and work-study stipends reduced the amounts collectible from student by an additional $ 1,000,000. What is the journal entry to record the scholarship allowances? A) Scholarships and Fellowships Expense 1,600,000 Accounts Receivable 1,600,000 B) Operating Revenue Deduction -Scholarship Allowances 1,600,000 Accounts Receivable 1,600,000 C) Operating Revenue Deduction -Scholarship Allowances 1,600,000 Deferred Revenues 1,600,000 D) Not recorded because it was deducted from tuition revenue before revenue it was recorded

B) Operating Revenue Deduction -Scholarship Allowances 1,600,000 Accounts Receivable 1,600,000

19. The equity section of the balance sheet for investor-owned colleges and universities includes which of the following designations? A) Unrestricted Net Assets, Temporarily Restricted Net Assets, and Permanently Restricted Net Assets. B) Paid in Capital and Retained Earnings. C) Net Investment in Capital Assets, net of related Debt; Restricted Net position; and Unrestricted Net position. D) None of the above.

B) Paid in Capital and Retained Earnings.

6. Which of the following statements is true regarding accounting and financial reporting for public colleges and universities? A) Public colleges and universities may choose to report in the same manner as private colleges and universities, using FASB standards. B) Public colleges and universities may choose to report as special-purpose entities. C) Both A and B are true. D) Neither A nor B is true.

B) Public colleges and universities may choose to report as special-purpose entities.

34. On December 1, 2016, St. Sebastian University received cash of $30,000 and a pledge for another $60,000 to be paid in 2017. The amounts are to establish a permanent endowment to provide scholarships for music majors. How should this event be recorded on December 31, 2016, assuming St. Sebastian is a private university? A) Restricted Cash 30,000 Contributions receivable 60,000 Contribution Revenue: Temporarily restricted 90,000 B) Restricted Cash 30,000 Contributions receivable 60,000 Contribution Revenue: Permanently restricted 90,000 C) Restricted Cash 30,000 Contribution Revenue: Permanently restricted 30,000 D) Restricted Cash 30,000 Contributions receivable 60,000 Contribution Revenue: Revenues: Permanently restricted 30,000 Deferred Revenues 60,000

B) Restricted Cash 30,000 Contributions receivable 60,000 Contribution Revenue: Permanently restricted 90,000

11. Private colleges are required to report residual equity in the following categories: A) Unrestricted and Restricted B) Temporarily Restricted , Permanently Restricted and Unrestricted C) Unrestricted, Temporarily Restricted and board designated D) Restricted, Unrestricted and Temporarily Restricted

B) Temporarily Restricted , Permanently Restricted and Unrestricted

45. Sam Smith died, leaving a will that provided that $1,000,000 be transferred to a private not-for-profit college. The college is to invest the funds for 10 years and give $40,000 each year to the granddaughter. At the end of the 10 years, the $1,000,000 can be used for any purpose desired by the college. Which of the following is true? A) The college would record revenue in the amount of $1,000,000, increasing temporarily restricted net assets. B) The college would record revenue in an amount equal to the $1,000,000 less the present value of the 10 payments to the granddaughter. C) The college would record revenue in an amount equal to the present value of the 10 payments to the granddaughter. D) The college would not record revenue for 10 years; then a revenue would be recorded, increasing unrestricted net assets.

B) The college would record revenue in an amount equal to the $1,000,000 less the present value of the 10 payments to the granddaughter.

38. On December 1, 2016, a college received a pledge of support for the general endowment. Which of the following is true with respect to this pledge?? A) The contribution will be recognized as revenue in 2016 if the college is a public institution. B) The contribution will be recognized as revenue in 2016 if the college is a private institution. C) Both A and B are true D) Neither A nor B are true

B) The contribution will be recognized as revenue in 2016 if the college is a private institution.

30. Which of the following would not be correct with respect to accounting for colleges and universities under the jurisdiction of the FASB? A) Contributed services should be recognized only when the services create or enhance nonfinancial assets or require specialized skills, are provided by an individual possessing those skills, and would typically be purchased if not provided by donation B) Unconditional pledges are deferred and recognized as revenue when collected. C) Depreciation is recorded D) Investments in stock with determinable fair values and all debt securities are reported at market value

B) Unconditional pledges are deferred and recognized as revenue when collected.

8. Which of the following would be true regarding the Statement of Net Position for a public college? A) Both current and long-term assets and liabilities are presented B) The net asset categories are: net investment in capital assets, restricted and unrestricted. C) Both of the above are true. D) Neither of the above is true.

C) Both of the above are true.

25. A public college had tuition and fees of $21,000,000. Scholarships, for which no services were required, amounted to $2,500,000. Graduate assistantships, for which services were required, amounted to $1,600,000. The amount to be reported by the public college as net tuition and fees would be: A) $21,000,000. B) $19,400,000. C) $18,500,000. D) $16,900,000.

C) $18,500,000.

26. According to NACUBO guidelines, what is the correct treatment for recognizing summer school revenues and expenses when a college's fiscal year ends on June 30? A) Recognize the entire amount of revenues and expenses in the year in which the summer term is predominantly conducted. B) Recognize the entire amount of revenues and expenses in the year in which the summer term began. C) Apportion the revenues and expenses to the two fiscal years, following accrual accounting practices similar to those employed by commercial enterprises. D) Recognize expenses in the year in which they were billed and the expenses in the year in which they were incurred.

C) Apportion the revenues and expenses to the two fiscal years, following accrual accounting practices similar to those employed by commercial enterprises.

22. Fees waived by an educational institution in return for services to be provided by students are reported: A) As a reduction in tuition revenue by directly reducing the revenue account or increasing a contra-revenue account. B) As an adjustment to tuition revenue in the government-wide statements. C) As an expense. D) By deducting the waived fee from tuition revenue before it is recorded.

C) As an expense.

37. On December 1, 2016, a college received a pledge to support a program in the following two years. Which of the following is true with respect to this pledge? A) If the college is a private institution, the contribution revenue will be recognized within the temporarily restricted category provided the pledge is unconditional. B) If the college is a public institution, no contribution revenue will recognized in 2016 since the time restriction is deemed to be an unsatisfied eligibility requirement. C) Both A and B are true D) Neither A nor B are true

C) Both A and B are true

39. Which of the following is true regarding the Statement of Cash Flows for a public college? A) The direct method must be used. B) The statement is in the same format required for state and local governmental enterprise funds. C) Both A and B are true. D) Neither A nor B is true.

C) Both A and B are true.

44. A college borrows money to construct a new biology building. Where will the interest paid on this debt appear in the Statement of Cash Flows, assuming The College is a private institution The College is a public institution A) Cash flows from financing activities Cash flows from capital related financing activities B) Cash flows from investing activities Cash flows from investing activities C) Cash flows from operating activities Cash flows from capital related financing activities D) Cash flows from operating activities Cash flows from operating activities

C) Cash flows from operating activities Cash flows from capital related financing activities

5. With respect to public colleges, which of the following is not correct? A) GASB requires public colleges to report long-term debt on the Statement of Net Position, to accrue interest and amortize debt discount and premium. B) GASB requires public colleges to report capital assets on the Statement of Net Position, to expense depreciation and to record gains or losses on disposals of capital assets. C) Cash received under Pell Grants is treated as held for the student in an agency relationship with offsetting asset and liability balances. D) All of the above are correct

C) Cash received under Pell Grants is treated as held for the student in an agency relationship with offsetting asset and liability balances.

46. In December 2016, a donor to a college established a trust in which college receives $ 500,000 to be invested. The college receives $ 4,000 of the income per year until the donor dies. At that point, the assets revert to the donor's estate. The college estimates that the present value of the anticipated receipts from the trust amount to $ 120,000. How should this $ 120,000 be recorded in 2016, assuming The College is a private institution The College is a public institution A) Contribution revenue Contribution revenue B) Deferred inflow Contribution revenue C) Contribution revenue Deferred inflow D) Deferred inflow Deferred inflow

C) Contribution revenue Deferred inflow

20. Which of the following is true regarding accounting and financial reporting for private colleges and universities? A) Pell Grants are reported as nonoperating revenue B) Revenues from residence halls, dining services and bookstores are reported as Auxiliary Enterprises - within nonoperating revenue. C) Expenses associated with central management, planning and administration are classified as Institutional Support - within income from operations D) All of the above are all true.

C) Expenses associated with central management, planning and administration are classified as Institutional Support - within income from operations

16. Which of the following is not true of a Statement of Activities prepared for a private college or university? A) Reimbursement type grants are recorded as operating revenue when qualifying expenses are made, not when the grant is approved. B) Reclassifications from temporarily restricted to unrestricted net assets are reported when the donor's restrictions have been met. C) Expenses may be unrestricted or temporarily restricted depending on donor intent. D) All of the above are true.

C) Expenses may be unrestricted or temporarily restricted depending on donor intent.

1. Public colleges and universities follow __________ guidelines while private colleges and universities follow ________ guidelines A) GAO, FASB. B) FASB, GAO. C) GASB, FASB. D) FASB, GASB.

C) GASB, FASB.

36. A college receives $ 500,000 of Pell Grants to be applied to current year student accounts for tuition and fees. What account should be credited upon receipt of the $ 500,000, assuming: The College is a private institution The College is a public institution A) Non-operating revenue Non-operating revenue B) Non-operating revenue Liability: Due to student accounts C) Liability: Due to student accounts Non-operating revenue D) Liability: Due to student accounts Liability: Due to student accounts

C) Liability: Due to student accounts Non-operating revenue

17. Which of the following types of college/university would have these components of the Financial Report? • Statement of Financial Position. • Statement of Activities. • Statement of Cash Flows. • Notes to the Financial Statements. A) Investor Owned. B) Public University. C) Private Not-for-Profit. D) None of the above.

C) Private Not-for-Profit.

35. On December 1, 2016, Sebastian University received cash of $30,000 and a pledge for another $60,000 to be paid in 2017. The amounts are to establish a permanent endowment to provide scholarships for music majors. How should this event be recorded on December 31, 2016, assuming Sebastian is a public university? A) Restricted Cash 30,000 Contributions receivable 60,000 Operating - Additions to permanent endowment 90,000 B) Restricted Cash 30,000 Contributions receivable 60,000 Nonoperating - Additions to permanent endowment 90,000 C) Restricted Cash 30,000 Nonoperating - Additions to permanent endowment 30,000 D) Restricted Cash 30,000 Contributions receivable 60,000 Nonoperating - Additions to permanent endowment 30,000 Deferred Revenues 60,000

C) Restricted Cash 30,000 Nonoperating - Additions to permanent endowment 30,000

18. For private colleges and universities, reclassifications of temporarily restricted and unrestricted net assets could be made: A) For satisfaction of purpose restrictions. B) When time restrictions expire. C) If the resources donated for fixed assets have been expended on such assets. D) All of the above.

D) All of the above.

14. Which of the following is not true regarding the Statement of Revenues, Expenses, and Changes in Net Position for a public college? A) Reimbursement type grants are recorded as operating revenue when qualifying expenses are made. B) Auxiliary enterprise activities represent revenues and expenses related to units of the college that provide services to students on a user fee basis and is classified as operating revenue. C) Student financial aid is a revenue contra account D) All of the above are true.

D) All of the above are true.

15. Which of the following is a required statement for a private college? A) Statement of Changes in Fund Balance. B) Statement of Revenues and Expenditures. C) Budgetary Comparison Statement. D) None of the above is a required statement.

D) None of the above is a required statement.